Take a look at this beautiful artist’s rendering of a mixed-use building. This is from the Glenwood Park mixed-use project in Atlanta. You have to admit, this looks nice with retail on the ground floor and a respectable number of condos above. Were a consultant to put this picture in an LCI survey questionnaire it would no doubt score high marks.
But there’s a cloud hanging over beautiful buildings like these – an external force that makes these types of mixed-use buildings practically unmarketable to buyers. I believe this external influence may be the root cause for Alpharetta’s and Avalon’s recent shift towards apartments in mixed-use.
Fannie Mae, Freedie Mac and HUD have all put restrictions on condo financing. Among these restrictions are limits on retail usage within a building with condos. They may vary from 10% to 30% of total square footage. This means that the more retail there is in a building, the less likely a condo buyer can qualify for a mortgage that conforms to these standards. The pictured building from Glenwood Park likely has a retail component of near 35%, something that stalled a portion of this development.
There are two ways a mixed-use developer can work around these restrictions. They can…
Build ‘em higher! Just start stacking floor over floor, condo over condo until the ratio is tilted more in the favor of residential. Of course this increases height of buildings, something that isn’t favorable to the community and even to potential buyers.
Don’t sell condos at all. If residents rent the units then there is no fussing with conforming mortgage nonsense. It might explain Avalon’s apartments, all of which are proposed in four story buildings.
It might also explain Alpharetta’s interest in removing nearly all restrictions on apartments in mixed-use zoning. The city’s mixed-use ordinances were likely developed before Fannie and Freddie clamped down on mixed-use condos.
It’s all a curious thing to consider. Proponents of mixed-use are frustrated by policies like this that favor (what they consider failed) single-family residences in suburbia over more “progressive” mixed-use.
In my mind this is a problem at the Federal level in agencies laden with unnecessary regulation and bureaucracy. I don’t believe municipalities like Alpharetta should have to bear the brunt of this by changing ordinances and land use policies in a manner against the will of the people. Fix the problem where it exists or ask developers to look for other solutions that work within the existing set of rules.
Thanks to Michael Hadden for his help researching this issue. Michael’s blog is New Urban Roswell. And I’m done writing about Avalon for a little bit!